It’s Time For Another Slice Of Papa John’s International (NASDAQ:PZZA)

Revenue Growth Accelerates At Papa John’s

The fast-food trade was a hot one this summer but even within that, there is pizza. The pizza giants were delivering in a time when people didn’t want to go out so their revenue surged. Papa John’s (NASDAQ:PZZA) alone saw revenue jump 15% in the 2nd quarter, well above consensus, and those trends have not played out. If the 3rd quarter results are any evidence, revenue growth at Papa Johns is still accelerating.

“Thanks to our focus on our strategic priorities, our commitment to an innovation mindset, and our dedication to supporting our team members and franchisees, Papa John’s delivered another quarter of outstanding results,” said President & CEO Rob Lynch. “Double-digit comparable sales growth, dramatically higher earnings and robust free cash flow all reflect a winning strategy and execution that have helped us outperform our competition and deliver five straight quarters of same-store sales growth.”

Papa John’s Revenue Beats, Comps Rise, Buybacks Authorized

Papa John’s International produced a mixed report but only barely. The only metric that matters and fell short of expectations is the adjusted EPS and even that is in-line with consensus. I say it fell short of expectations because the analyst’s estimates are notoriously low across the broad market. In that scenario, anything less than a solid beat is less than what the market-at-large is expecting.

On the top-line revenue came in at $479.91 million. This is up 17.1% on a YOY basis, 4.2 QoQ, and 1.50% ahead of the consensus. The strength is driven by a 21.6% increase in global comp-store sales that were led by strength in NA. Total North American sales increased by 23.8% led by a 25.6% increase at franchised locations. On the bottom line, adjusted earnings came in at $0.35 and in-line with expectations while the GAAP EPS of $0.35 beat by $0.03 and this compares to a loss in the previous year.

The strength of the rebound and acceleration didn’t spark a guidance upgrade but maybe the next best thing. The board of directors authorized a new share repurchase program worth $75 or about 3% of shares outstanding. While not a massive amount, it is enough to move the needle and evidence of the company’s financial health. In terms of operating capital, cash from operations and free-cash-flow cash from ops is up 237% YOY and FCF nearly 800%.

Papa John’s Pays A Safe Dividend

 Papa John’s pays a safe dividend if not a growing one. The payout ratio is running about 60% of this year’s consensus and 30% next year’s so no red flags there. The company has a history of increases as well but steady is a better description. The company could have a better cash position but it’s not bad, there is no short-term debt and the long-term debt is small and well-managed. Coverage is ample and the leverage ratio a low 3X.

 The Technical Outlook: Papa John’s Pullback Is Over

Shares of Papa John’s have been in a downtrend since hitting their peak over the summer. Coincidentally, price action is trading just above a key and potentially very strong support level where they appear to be bottoming. I say appear to be bottoming because price action hasn’t produced a strong bounce yet despite overbought conditions, divergences in MACD, and the presence of support. But that could change. The 3Q news has shares edging higher in the pre-market session. Regardless, with shares at this level and results looking so good this stock is a buy. PS, the analysts are very bullish on PZZA with a consensus target 25% above $76 action.